It’s common for individuals to want to give to specific charities in a will or trust. However, there are some items you should consider when creating your bequest.
Dollar Amount vs. Percentage
Your donation or legacy gift could be written as either a dollar amount or a percentage of your estate. In terms of the donation itself, it may not matter to the organization whether you leave them a specific dollar amount or a percentage. However, for your planning purposes, you should consider how much you want to leave to a charity, especially if you are giving to multiple organizations. You could leave $2,000 to Charity 1 and $5,000 to Charity 2, or you could leave them each 5%.
The language of the donation itself is flexible and could be written to fit your wishes. You could even combine both options, such as “$5,000 or 5% of my estate, whichever is the greater amount.” You simply need to decide if you want to place a finite dollar amount on your donation or if you are fine with a more flexible percentage option. Most of the time, it’s best to list a percentage because it is very difficult to predict what your estate will be worth at the time of death.
Making a donation to be used for a specific purpose sometimes gets people and charities into trouble. One such example is when a New Jersey couple donated a large sum to an animal shelter in their hometown to finance the building of a new structure for large dogs and older cats. But before construction on the structure even began, the shelter merged with another organization, which did not intend to build a structure in the town specifically for those animals, and did not have plans to name anything for the couple. This couple sued to get their gift returned, as they argued that the organization did not meet the specific conditions of their gift. The court sided with the couple, stating that although the shelter argued they had met the conditions as well as they could under the changed circumstances, the specific details of the gift were not met and the charity had to return the funds.
If you decide to leave a gift to be used for specific purposes, this needs to be very clearly stated in a contract or gift agreement. You may also leave specific instructions with your will if the gift has not been structured beforehand, though it is advised that if you have very specific requirements, you speak with the organization you wish to donate to as early as possible and make an agreement.
When you make a gift with a specific use in mind, but it’s also acceptable to you that the organization use the funds in other ways if something doesn’t go according to plan, you can include language such as: “If the gift cannot be used for these intended purposes, it may be put toward such purposes as the board of directors decides.” This allows the organization to have some flexibility when receiving your gift. They should first attempt to fulfill your wishes as originally stated, but if they cannot, then the funds could be reallocated to a different project or department where it is most needed. In the case of the animal shelter listed above, such language would have allowed the shelter to proceed with the funds under their changed circumstances.
If you are unsure if a charity you would like to donate to will accept certain gifts, it’s advised to reach out to them directly to find out what kinds of donations are most needed and how they would plan to use money you donate to them in your estate planning.
Talk to a financial advisor or an estate planning attorney to find out more information about charitable giving and how you can set up your estate plans accordingly.